Feature Friday: Buying Bitcoins Instantly

Our portfolio company Coinbase introduced a new feature yesterday, the ability to buy Bitcoins instantly. I've always thought speed was the single most important feature of any app. And in the case of buying Bitcoin, the four day wait time that was the norm at Coinbase was certainly problematic. Now, if you are a fully verified user, you can buy and sell up to 50 BTC instantly.

Bitcoin is a fairly immature technology at this time. The opportunity for entrepreneurs is to build technology, systems, processes, procedures, and a lot more on top of it so that it can become something "normals" will be comfortable using.

There are reasons why it used to take four days to settle a BTC purchase at Coinbase. And they've done a bunch of things to make it possible for a verified user to buy instantly. Over time, I expect they will build more things that will make it easier for a new user to get this kind of capability.

Many people are focused on the price of BTC and whether it is going up or down. Speculating on BTC is obviously one way to make (or lose) money right now. But I think the bigger opportunity is in making Bitcoin easy to understand, buy, stell, store, and transact in. And that will take a lot of engineering, innovation, and other efforts. So I am glad to see Coinbase engaging in that activity and rolling new stuff out. That is going to be good for both them and the market in general.

#hacking finance

Comments (Archived):

  1. awaldstein

    I think usage is the best education and marketing for Bitcoins.It’s non trivial to explain. If I had an vested interest in them being successful I would think more about how to get a niche to use them then trying to explain them.This will be a jump the chasm case study I bet.

    1. JimHirshfield

      “This will be a jump the chasm case study I bet.”That’s a bold prediction.

      1. Kasi Viswanathan Agilandam

        A damn good marketing person lives on bold prediction.

        1. JimHirshfield

          @awaldstein:disqus fortifies his morning smoothies with bold predictions.

      2. awaldstein

        Boldly incorrect potentially.I know that every time the answer is to educate the market you better come up with a solution that requires as little explanation as possible.

    2. Matt A. Myers

      Fairly sure the black market is what primarily got Bitcoin moving forward. I’d love for someone else to prove me wrong though.

        1. Dave W Baldwin

          Made it to the just under 35 minute mark after the host obviously misunderstood the guest regarding youth unemployment.Something else coming January is the next step in Frank/Dodd that is meant to get rid of Mortgage Originators that will expand to killing the related industries also. Banks will up the % for loan (my guess is toward 7) while the prime will be kept artificially low for the savers. So, the younger will be kept out of housing, the lower to mid ‘middle’ will be making nothing on the savings and so on.What I do see is the need for a starting price to be much lower for the BC in order to allow a more fluid trade. Think of the restaurant owner who can take purchase in part cash/BC and can have an eye on where the value of his BC’s are.Thanks for the link, good program.

    3. kidmercury

      they will face textbook chasm issues.

      1. awaldstein

        most certainly…it ain’t trivial and it ain’t probable, but if I had to work day in day out to make this happen, i would start my thinking there.but, of course, i don’t.

        1. Andrew Kennedy

          i agree with you. at it’s core, the challenge is how to establish credibility. intermediaries that are willing to backstop the price of bitcoin (ie can hedge bitcoin price volatility) would be very helpful for adoption. Fannie Mae, Freddie Mac, Sallie Mae all created pricing stability (and then chaos..). its important early on in the life cycle to minimize downside risk as part of the user adoption strategy. Its a way to improve the value prop of the product. bitcoin insurance…

          1. kidmercury

            any institution that looks to create bitcoin derivatives will be subject to financial regulation.

          2. Andrew Kennedy

            I haven’t been following financial regulation legislation for a while now so pretty far away from knowing what’s going on there, but the point i am driving at is that vendor’s / partners / intermediaries / brokers (credible pics & shovels) seem like a good place to pick up some credibility that can improve the end user value prop. bitcoin is a brand in need of some tlc and so trying to help from macro (albeit vague) perspective.

      2. ShanaC

        no, they face other isseus. I think currency is a special case due to the way its network effect works (everyone accpets and agrees upon a value in thier head until their life becomes denominated in the coinage itself)

    4. LE

      “how to get a niche to use them then trying to explain them”Also begs for the type of publicity that I call “dead bodies for sale on ebay” that the press laps up. [1]Like a famous celebrity getting busted for trying to pay a prostitute with bitcoin. Or a sports celebrity announcing that his new contract will be for many millions as well as many millions in bitcoin. Then after a fair amount of mention of this people start to hear it everywhere and it becomes important in their brain and matters. The press is great at this. They did this with the Internet early on giving tons of free publicity to any fish out of water situation.[1] (I’m 100% serious).

      1. awaldstein

        Finding the story is key to everything.I never considered the press, the other, just overt. All I have to do is feed them. Not simple but certainly not obscure.

  2. wollit

    We at wollit are focused on the storing and transacting parts of the ecosystem.The edges of the network where the fiat-bitcoin exchanges occur are less appealing to us and have less impact potential than being at the centre of a bitcoin users daily habits.As an industry we need to take back control of the message and vision from the mainstream press who have painted it as a fallen-utopia, confusing, volatile and dangerous.Our collective goal is to educate, inform and make Bitcoin universally accessible and useful.’Bitcoin isn’t perfect. But it’s not competing with perfection’

  3. jason wright

    i woke up this morning with bitcoin on my mind.why did the price fall so dramatically in April?

    1. Vineeth Kariappa

      ppl realized the intrinsic value is nothing.

      1. ShanaC

        that is true of dollars too

        1. Vineeth Kariappa

          Benjamin Franklin has underwritten the dollar. You are not allowed to ridicule him.

    2. fredwilson

      it was the unwinding of a speculative bubble that had built upi think you have to expect a lot of that sort of thing in BTC for the forseeable future

      1. Matt A. Myers

        Do you know if there’s been a bit of a gold rush with Bitcoin?

      2. Jake

        Do you think that would of happened if the infrastructure didn’t srangle itself during the run-up? I know it seems silly to say it was exchange problems when it’s down 60% but gox was choking and coinbase was extremely difficult to purchase through. When money shows up again I hope the infrastructure can handle it..hopefully coinbase will allow a lot more than 50 BTC purchases

      3. jason wright

        April – goings on in Cyprus in seems.now Argentina.

    3. JimHirshfield

      How many bitcoins were on your mind?A bitcoin for your thoughts, please.

      1. jason wright

        bitcoin is in theory a distributed network, peer to peer. is there a place for nodes in the long term?twenty one million – i don’t now count sheep to get to sleep 🙂

    4. kidmercury

      because selling demand was greater than buying demand

      1. andyswan

        And a good portion of selling demand was pent up due to one exchange having a massive FUBAR and regulators closing an exit route…

      2. jason wright

        classical market dynamics, but why at that moment?there’s a basic lack of liquidity, and the technical infrastructure is still brittle, with lots of friction. why the rush to sell at that moment?

        1. kidmercury

          too small of a market, anything could move it. maybe some rich dude wanted to sell some bitcoin to buy a yacht.

  4. markslater

    popularity in opacity.we saw this with file sharing.like bitcoin, filesharing occupied that “behind the veil” position in our pysche where the collective almost understood what it was and how it worked but was intrigued byh the fact that they could not quite put their finger on it.Bitcoin is trendy right now because of its opacity…..people hear about this amazing vision, and are intrigued by not quite understanding how it works…The people that broke the veil in file sharing, won.

    1. fredwilson


    2. ShanaC

      how do you break the veil wit a currency though. it is a state of is

      1. markslater

        its more about breaking the veil of how it all works rather than what it “is”…..

    3. Chris Phenner

      Who ‘won’ in file-sharing? – fmr Napster v1 employee

    4. JamesHRH

      Mystery = excitement = interestClarity = Understanding = AdoptionCoinbase sounds like getting into the weight scale biz, during the gold rush.

  5. JimHirshfield

    Transaction speed is important in markets. Lots can happen in 4 days.

    1. Matt A. Myers

      Selling will be slower and that is where the risk is – especially when people start dumping it.

      1. JimHirshfield

        Why? A sell transaction is not any different than a buy transaction technically.

        1. Matt A. Myers

          You determine the sell price, so if it’s higher than what market is buying at currently (and what you paid for it) then it’s not going to be as easy to find someone to buy it at that price – unless it’s on an upward trend again ?

    2. pointsnfigures

      seen it happen in 4 seconds

  6. markslater

    you know there is hype when you subscribe to their newsletter! i just did!

  7. Kasi Viswanathan Agilandam

    Parallel universe.from wiki …The correct quantum mechanical definition of parallel universes is “universes that are separated from each other by a single quantum event.”…or by a bit 🙂

  8. Kirsten Lambertsen

    So, how long does it typically take to convert Bitcoin into local currency – aka cash in a bank account?I would really love to be able to pay offshore talent without having to fork over 5%+ to the bank or other wire service. Is Bitcoin a practical solution?

    1. fredwilson

      yes. coinbase will have this feature soon i hope.

      1. Kirsten Lambertsen

        That will be huge for someone like me and about a gazillion other little startups I know who use offshore developers right now.

        1. Alan

          I dare say it is already available:It goes like this:BTC price is 100USD per BTCT+0: Kirsten buys 10BTCT+10sec: Kirsten sends 10BTC to AliceT+11sec: Alice’s Coinbase/BitStamp/BitPay/etc account (automatically) converts the 10BTC to USD/EUR/etc.T+12sec: BTC price moves to 1,100, or 1000 USD per BTCT+3days: Kirsten checking account is debited (via slow ACH) 1000USD (+ ~1% fees)T+3days: Alice’s checking account is credited (via slow ACH) 1000USD (- ~1% fees) (or local currency, eg EUR)You’ll see that you’re only exposed to 12 seconds of volitlity. The bitcoin network was used as a USD/EUR payment network, a transfer of value, rather than using bitcoins as a store of value. Read up on bitcoins the currency versus Bitcoin the payment network to understand more.Cheers

    2. andyswan

      1. 2-3 days generally speaking but getting faster all the time thanks to initiatives like CB2. Actually, probably not… unless both you and the recipient are completely comfortable with the market fluctuation. It’s actually quite possible, sometimes even probable, that the value of the bitcoin will move by > 5% during the your bank > bitcoin > their bank process. For now.

      1. Kirsten Lambertsen

        Ya, that’s what I was thinking. The transfer to a bank acct needs to be within 24 hours, probably, for both parties to feel comfortable.

        1. BTCguru

          Coinbase allows instant cashouts for payments, meaning that with instant purchases you could buy the bitcoin, immediately transfer it to whoever you’re paying, and without any action on their part it would convert to USD at the market price. In this scenario bitcoin is simply the transfer mechanism, neither of you bear volatility risk, and it costs 1% in and 1% out – cheaper than international wire transfers by a long shot.

          1. Kirsten Lambertsen

            So you’re saying I could use it today for paying offshore peeps? I will go take a look 🙂

          2. Alan

            Yes, that is what he is saying. It goes like this:BTC price is 100USD per BTCT+0: Kirsten buys 10BTCT+10sec: Kirsten sends 10BTC to AliceT+11sec: Alice’s Coinbase/BitStamp/BitPay/etc account (automatically) converts the 10BTC to USD/EUR/etc.T+12sec: BTC price moves to 1,100, or 1000 USD per BTCT+3days: Kirsten checking account is debited (via slow ACH) 1000USD (+ ~1% fees)T+3days: Alice’s checking account is credited (via slow ACH) 1000USD (- ~1% fees) (or local currency, eg EUR)You’ll see that you’re only exposed to 12 seconds of volitlity. The bitcoin network was used as a USD/EUR payment network, a transfer of value, rather than using bitcoins as a store of value. Read up on bitcoins the currency versus Bitcoin the payment network to understand more.Cheers

          3. kidmercury

            whoever is providing liquidity for bitcoin is bearing the exchange rate risk. they may charge 1% now, but that percentage will be a function of volatility — it needs to be for them to make money.

      2. Kasi Viswanathan Agilandam

        Is bit coin taxable?….

        1. fredwilson

          no but the gains and losses and the transactions you do with it are

        2. andyswan

          In theory, everything is taxable. If you are paid in corn-meal, it’s supposed to be reported.

        3. JLM

          .Income is taxable. Bitcoin is just currency which may be used to calculate the magnitude of income.Even barter transactions are taxable.Only like kind exchanges are non-taxable in the short term and they are subject to very complex rules. Almost not worth doing except for real estate.Real estate like kind exchanges are the last real bastion of personal wealth movement outside the fingers of the tax man.Keep doing exchanges until you die and then leave it to your kids who receive it with a “stepped up basis” — the last real sleight of hand in the Tax Code left for individuals.In this manner, the increase in value is never taxed. Of course, I am always less than enthusiastic about any strategy which requires me to die to make it work.I’m a bit funny like that.JLM.

          1. LE

            “Real estate like kind exchanges”In theory of course correct. In practice (with 1031) coordinating a property you want to buy within the time constraints and a property you want to sell is not trivial. A bit of duress going on.I would argue also that in theory you will pay more when doing a 1031 exchange than not doing one for the same property if things aren’t played exactly right. (Meaning the seller knows your motivations and timeline for purchase of a substitute property. And even if the seller doesn’t know his broker knows and that is going to change judgement.) [1]Another way to avoid some taxes on the sale is to offer a mortgage on the property instead of selling for cash.[1] Of course you could also play this as “I will need to buy something by x date and after x date I won’t be around to buy your property at any price”.

          2. JLM

            .You have to have the right kind of property.Using an exchange facilitator makes it completely transparent and the seller of the exchange property has no inkling as to the status of your funding or why you are buying something.When you finance a sale, you are subject to installment sales taxes which may actually accelerate the collection of taxes as part of each payment is taxable.JLM.

          3. LE

            “exchange facilitator”Have used this company and highly recommend:http://www.1031corp.com/def…Very reasonable price as well considering what they do.

      3. ShanaC

        unless you do the transfer in person, like what happens in union square on mondays

        1. andyswan

          Yep. There are ways…always ways 🙂

    3. Matt A. Myers

      The problem I see here though is the fluctuation in Bitcoin is far greater than 5% from when you’re likely to spend it – so then prices are inflated to add a safety net, or you’re swallowing losses yourself. How do you rationalize it?

    4. Tom Labus

      In America, this goes back all the way to the Whiskey Rebellion in the 1790’s. Farmers used home made whiskey as currency and it worked but it also got troops sent to break up the “whiskey rebellion”.

    5. kidmercury

      as others have noted the exchange rate volatility makes bitcoin unfeasible as a payment solution. i.e. you may not pay a 5% transaction fee, but if the price of bitcoin falls while you are holding them before you buy back USD, you will end up paying more. even if you try to do an instant conversion, whoever takes the other side of that trade is going to charge a fee and that fee will be a function of bitcoin’s volatility.

      1. andyswan

        For the record, bitcoin has moved over 5% since this post was published. lol

      2. LE

        “exchange rate volatility”Agree. And would mention that the same applies to stocks which pay dividends as well. Variance can easily wipe out the dividends.

    6. LE

      “I would really love to be able to pay offshore talent without having to fork over 5%+ to the bank or other wire service.”Why is that such a big deal? I don’t get it.I say focus on increasing sales and not worrying whether you are paying 5% or 1% in fees. You will spend more time managing things like that (at this stage).Additionally one of the things you find out when bartering (something I know much about) is thata) you end up paying more because of the limited amount of people who will barter [1] andb) you end up making other quality choices because you are not free to choose any vendor or good at any time.Cash is king.[1] When I was in the printing business bartering was great. Customers weren’t price sensitive because they were spending “funny money” and had so few vendors to choose from. We jacked the price up. But when we were spending the barter money on hotels we didn’t get the cheapest rates we got the “rack” rate. And in restaurants in general you couldn’t go during busy periods and spend barter dollars (all this of course is YMMV I’m just making a broader point here). All in all I made out great with it because I knew how to work the system (traded for apartments and many fixed price goods where it was same price as cash but that’s me.)I remember when the printing supply house joined the barter exchange that we were previously a regular (credit customer of). I called them up the next day and ordered a shitload of supplies using every barter dollar that I could. They barter exchange was pissed off the printing supply house had no idea what was going on. Made them institute a rule when a new person came online to prevent that from happening.

    7. Nathan

      Those who accept Bitcoin are not phased by the short-term volatility, but rather have confidence in its long-term value, which is why there are many online stores that give you a discount if you pay with Bitcoins.

  9. andyswan

    I have to say I really like this Coinbase bet. Between them and dwolla you’ve got the “weird nerd transactions” covered…for now. Not a bad place to be.Of course, the bummer of this news is that the instant transactions are only available to people who tie their account to a bank and government documents, essentially eliminating one of the major benefits of using bitcoin in the first place.But— baby steps in the right direction can get somewhere meaningful fast. Nice work to the CB team.

    1. LE

      “weird nerd transactions”Investors (Fred included) have been intermittently reinforced on that one so they are automatically biased toward something in that direction of the big gamble.”But— baby steps in the right direction can get somewhere meaningful fast.”Remembering what Yaeger character said in “The Right Stuff” – “it takes a special man to volunteer for a suicide mission” (or something like that).You could say he was wrong except that there was certainly more of a chance that the early astronauts would have died than not.

      1. pointsnfigures

        One competitor that uses actual currency to transact is venmo.com Interesting to watch the micropayment space between two single counterparties play out.Any payment is okay as long as the two parties agree on it. When there is a broader market that helps them leverage their transaction for other goods, its even better.For some reason Disqus won’t let me paste long links here, but Google “Economics of a POW Camp”.There was a market economy in German WW2 POW camps that functioned well without any currency at all.

        1. LE

          “German WW2 POW camps”My family was in german concentration camps during that war. Never discussed what happened inside, but after the war chocolate was used to get women. From what I was told. In the camps obviously some people did better than others for sure. No surprise there. Understanding the power structure, working the system, and adhering to the pecking order was key. (Almost the opposite of how many people behave today.)

          1. pointsnfigures

            In the POW camps, the prisoners were sent baskets of goods from the Red Cross. They set up a market economy using cigarettes. There was division of labor-one guy even set up a coffee stand and sold cups of coffee. He used cigs to buy coffee and measured profit in how many cigs he had left. There were meat rations in the baskets, for vegetarians that didn’t eat meat it was a boon. They were able to trade meat for cigs to get what they wanted. Non-smokers also got a boon too, since they were given currency each month that they could use (and not burn!). Eventually it all came crashing down when they proposed setting up a centrally controlled economy because some people were afraid other people were making too much money.Sound familiar?

        2. kidmercury

          reminds me of the viewpoint that commodity money, i.e. trading cigarettes as money, is the only sovereign money a free society can be built on. from this comes the joke that the only place to find an economy based on liberty is in prison.

  10. takingpitches

    Digital currency at analog speeds is a bummer!

    1. ShanaC

      currency has a speed naturally.

      1. zack

        Money Multiplier?

  11. jacopogio

    The main problem with digital currency is just … “trust”.

  12. JLM

    .There are just some things that have to happen at Internet speed to be taken seriously.This is a logical and natural development but it is just catchup.This is why things like eVerify are so damn important.And, why not, you can transact a credit card transaction in seconds. Right?JLM.

  13. Matt A. Myers

    1% of 50 Bitcoins is good revenue.

  14. mikenolan99

    I was traveling in Ecuador and a thought occurred, which may relate to bitcoin.Ecuador uses the US dollar as it’s currency – $20 US bills come out of ATM machines – but, they also continue to use their own minted coin based currency.So here is my question – when they “buy” US currency, and supplement it with local currency, does that have a negative impact or positive impact on the value of a dollar? (Realizing that the entire Ecuador economy is about equal to JLM’s annual fuel bill for his big red car…)And, when we supplement the US Currency with bit coin, will it have a similiar effect?

    1. kidmercury

      usually a currency that pegs itself to the USD has a central bank that regulates the currency’s money supply and capital controls so that its impact on the parent currency it is pegged to is minimal. in other words, the ecuador central bank most likely implements a monetary policy that minimizes its impact on the USD.with bitcoin there is no central bank, though if it competes for transactions with the USD, it could in theory reduce demand for USD.personally i think a cyber-currency with a central bank is needed for many reasons, the most important of which is the concept of monetary stability touched upon here.

  15. LE

    In years to come bitcoin will be used as a case study in how either a bunch of people got something totally wrong or a bunch of people got something totally right.Most interestingly, in our circles, everyone has been fairly warned that this could be something. Nothing sneaking up on you here. You are seeing some of the smart money investing in it so you have to make a decision on whether you are in or out at this early stage.Having a really keen understanding on a basic level of how money is made and how people think in terms of transactions as well as human nature (and having done a fair amount of bartering to boot) I put myself in the camp of not seeing this working in any significant way. (Which is not the same as saying that there won’t be a “greater fool” situation whereby an early investor could make out well (note the hedge I am doing there!)That said many older people don’t understand why someone would pay $4 for a cup of coffee so I’m trying to avoid thinking in terms of what appeals to me vs. others.But since the vast majority of business is conducted by small business and getting small business to adopt something like this take so much effort I simply don’t see how this can come close to hitting the tipping point.In the end the tax by the current system (credit cards) really isn’t that big of a deal for the vast majority of people selling either online or offline.What problem does bitcoin solve exactly?

  16. John Saddington

    This feature just prompted me to jump in. Well done.

  17. pointsnfigures

    Don’t feel bad. The stock industry still takes 3 days to clear a stock transaction. When I electronically transfer money from my brokerage account to bank account, 3 day wait.$CME clears trades intraday. There is no reason why others can’t do the same. The economic reason is they want to earn a little extra juice on the transaction.

  18. William Mougayar

    When will we see a mobile Bitcoin wallet, where instead of paying with a credit card, I pay with Bitcoin inside the phone, both to a merchant physically or remotely, AND to a person, physically or remotely.

    1. Matt A. Myers

      I remember seeing a brief description of a recent patent given to Apple, and it sound like they stored actual currency on the phone – this could be what they are attempting?Someone big like Apple could certainly create/facilitate the growth of their own closed Bitcoin-like ecosystem.

      1. robertdesideri

        Think of the blockchain as a content management system. Makes it easier to see it’s just a next gen ledger.Regarding Apple, it would be intelligent for then to have their own currency, save them a lot of fees. Apple are already aggregating your transactions for periodic processing to reduce the number of actual cc transactions. Easy next step for them.

        1. James Ferguson @kWIQly

          Yup we are considering our own currency for our county, my village, my house, and I am even trying to set up a bureaucracy whereby I have different pots for different purposes. NOOOOO—-!The value is in the idea unencumbered by ownership (of the idea) and taxation of the transaction – there is NO value in having more than one such system.

    2. fredwilson

      now. get the bitcoin client for android or ios. apple doesn’t allow buying and selling bitcoin on the iOS app. but you can use both for sending and receiving bitcoin. that’s how i did all of my transactions at the park a few weeks ago.

      1. William Mougayar

        Great. Thanks. I’ll do that.

      2. Techman

        Do any “big” retailers even accept Bitcoins?

  19. jason wright

    i wonder if George Soros has taken a position on bitcoin?

  20. Pete Griffiths

    Ease of use.With trust and security.Are the biggest obstacles to adoption.These kinds of tools are very valuable.

  21. Chris Phenner

    I was in the back of an Uber going over The Bay Bridge when Coinbase’s news hit my inbox yesterday, and I clicked to make myself Instant via my iPhone.By the time I reached The Marina 15 minutes later, I was stuck.I don’t know what exactly happened, except that I was not ‘Verified.’ I already had a Coinbase account. And I went back to Coinbase via my iPhone today to see where thing stood, and that was unclear, but I could ‘Send’ and ‘Receive’ Bitcoin.I’m ready to dive in. I pull for Coinbase. And I’m taking deeper breaths.

  22. jason wright

    “There are only a few seconds between you and more Bitcoin. By the time you finish reading this sentence, someone will have converted dollars into BTC instantly using Coinbase.”When are those without a US bank account going to become open to Coinbase?

  23. James Ferguson @kWIQly

    It all about Current-cy and Late-ntcy

  24. Techman

    I think that Bitcoin is still a unstable currency to use all of the time.

  25. William Mougayar

    I just saw a Bitcoin pay option for the first time as part of the payment options. Look at that. Scan to pay! I love it.

    1. jason wright

      porn sites always innovate first

      1. William Mougayar

        That was from a VPN service site.

  26. Adris

    Would you know if Swiftcoin is a modified version of Bitcoin or if it is a new eCurrency? I haven’t seen much written about it except what’s on their forum http://bit.ly/1aLYCcg An article with some details of your research and thoughts on this would be appreciated.

  27. Adris

    Is it true that Swiftcoin is the new decentralized version of Bitcoin or if it is just a new eCurrency? I haven’t seen much written about it except what’s on their forum http://bit.ly/1aLYCcg Links to any article with some details on this or any thoughts would be appreciated. .